Car industry keeps dominating

SLOVAKIA experienced the biggest interest on the part of French investors back in 2003 and 2004 when a French carmaker decided to launch a brand-new plant in Trnava and when Slovakia became a member of the European Union. During the following years, the number of French companies in Slovakia doubled. This increase was halted by the global economic financial crisis, and now stagnates at about 400. In spite of this, France is one of Slovakia's largest investors and trade partners.

(Source: TASR)

“The presence of many French companies and large investments made France a major economic partner of Slovakia in less than a decade,” French Ambassador Didier Lopinot told The Slovak Spectator. “French companies occupy an important place in the Slovak economy, behind Germany and Austria, especially in the automotive sector.”

Richard Dírer from the Slovak Investment and Trade Development Agency (SARIO) specified that French investors started to arrive in Slovakia in 1990, initially making smaller investments in the machine engineering and food industry. Bigger investments began to roll in after 1991.

“The biggest French investors are Orange and PSA Peugeot Citroën, which triggered the arrival of many French equipment manufacturers,” said Lopinot.

The French-Slovak Chamber of Commerce estimates the investment into Orange Slovakia by France Telecom at €1.1 billion and the investment of the French carmaker at €1 billion.

The French Embassy estimates the aggregate investment at approximately €5 billion in investments, 380 subsidiaries and 29,000 employees. French companies are present in the main economic sectors including the automotive sector, energy, construction, telecommunications, chemicals and pharmaceutical, financial services, etc.

“Foreign direct investments from France to Slovakia are proof of the creation of permanently sustainable relations with regards to the fact that the return of investments of such giants as PSA, Gas de France or Faurecia is estimated at 25-30 years at least,” said Dírer.

Dušan Huszár of the French-Slovak Chamber of Commerce specified for The Slovak Spectator that Slovakia has never ranked among priority destinations for small and medium-sized French companies. In spite of this, the chamber registers in Slovakia more than 400 French companies; their number has more than doubled since 2003. Out of these, 44 percent operate in the services sector (banking and insurance), telecommunications, retail trade and transport and logistics. More than one fifth comes from the energy, water and waste management, chemistry, plastics and pharmaceutical industries. Mechanical engineering and metallurgy account for 12 percent. Other French companies can be found in the food industry, construction and elsewhere.

Huszár sees several factors as being behind this positive development, especially the decision of the French group PSA Peugeot Citroën to invest in Slovakia in 2003 and the entry of Slovakia into the EU in 2004.

“Nevertheless, it is necessary to say that the number of French affiliations in Slovakia has been stagnating since 2008,” said Huszár, adding that the global economic crisis resulted in Slovakia also witnessing departures of important investors such as Gaz de France (SPP), Electricité de France (SSE in Žilina) or Sanofi-Aventis (Zentiva Hlohovec) from Slovakia and affected the interest of French SMEs.

The crisis has, however, brought new opportunities.

“On one hand, many of these companies, which were pondering an investment in Slovakia, have withdrawn from their projects because of the crisis while contrary to this many decided to overcome their problems by establishing cooperation with Slovak partners or by the launch of their own affiliation in Slovakia,” said Huszár. “This is because Slovakia, through its production costs, the price and quality of its labour, and also by its tax conditions remains interesting for French business persons.”

According to Huszár, French investors are satisfied with the business environment in Slovakia. They face, alongside Slovak companies, problems which are specific for individual industrial sectors. He used as illustration the problem of high electricity prices which resonates among French companies engaged in manufacturing. These prices exceed by several times the prices manufacturing plants of the same companies in other EU member countries have to pay. This, as well as other problems with which French investors deal in Slovakia, were on the agenda of three round tables which the French-Slovak Chamber of Commerce organised in 2013 and 2014 and attended by Prime Minister Robert Fico, Foreign Affairs Minister Miroslav Lajčák, representatives of ministries of Economy, Finance, Labour and others. The next round table is scheduled for November 20.

Among comparative advantages due to which French investors decided to invest in Slovakia, Huszár listed its qualified and still relatively cheap labour force, a flexible Labour Code, the advantageous tax system with the unified income tax, the euro, suitable geographical position in the middle of Europe, positive economic growth reported also during the crisis and especially prospects for the growth of the economy in the future, possibility to finance projects from EU funds and others.

In terms of the current interest of French investors Lopinot said that companies pursue global strategies and take into account many factors when deciding to invest.

“Thus, economic relations between our two countries benefit greatly from our common currency and our integration into the internal market of the EU,” said Lopinot. “In addition, the investment climate in Slovakia is good, with a valuable political and economic stability”.

He sees opportunities for new investments and new contracts in the nuclear field, where several French companies are already positioned, as well as in infrastructure, such as roads or railways.

SARIO believes that the automotive industry will remain dominant, but it expects that Slovakia's other sectors of industry and services would also be interesting for France. It registers interest in cooperation in building Slovakia’s road infrastructure as well as a permanent interest in trade-investment in cooperation in the environment.

 

Trade

 

France is the ninth largest trading partner of Slovakia, with 4 percent of the total trade.

“French exports to Slovakia are very dynamic, and the decline observed in the wake of the crisis in 2009 has been reversed,” said Lopinot adding that they expect an increase in French exports of food products and luxury goods.

Huszár of the French-Slovak Chamber of Commerce specified for The Slovak Spectator that the economic cooperation between Slovakia and France registered an upward trend over the last few years, except during the crisis years of 2008 and 2009 and he sees especially the investment of the French car maker in Trnava.

In 2013, bilateral trade amounted to €4.9 billion, with Slovakia’s export of €3.25 billion and import of €1.67 billion. The trade balance is positive for Slovakia in the long term, especially thanks to the export of cars and their parts.

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